Businesses lose customers, run out of money, lay off workers

The VIetnam Chamber of Commerce and Industry (VCCI) and World Bank in Vietnam have jointly conducted a survey to assess the impact of the pandemic on Vietnam’s enterprises.

More than 87% of enterprises have suffered from COVID-19. Textiles and garments, communications, real estate, electric appliances and engine vehicle manufacturing, education, retail, electronics manufacturing and tourism were hit the most.

Most enterprises said COVID-19 has affected their approach to customers, cash flow and workforce. Half of private enterprises and 63% of foreign invested enterprises said they met difficulties in accessing customers. More than 30% of private enterprises and 41% of foreign invested enterprises (FIEs) complained about supply chain disruption.

Meanwhile, 46% of private enterprises and 42% of FIEs met problems with cash flow balance. At least 35% of private enterprises and 22% of FIEs had to lay off workers because of business slump.

The number of workers laid off because of COVID-19 by economic sector was calculated based on the figures from enterprises which provided information. Each private enterprise had to lay off 10 workers on average, and FIEs 38.

Vu The Binh, deputy chair of the Vietnam Tourism Association, said there were 2.9 million workers in the tourism industry in 2019, and 90% of them have quit their jobs or have temporarily stopped working.

The survey has also found that newly set up businesses are bearing the negative impact the most. At least 89% of private enterprises and 92% of FIEs operational for less than 3 years have been mostly or completely affected by the pandemic.

The proportion is lower for enterprises with a longer time of operation. However, 84% of private enterprises and 85% of FIEs with more than 20 years of operation were affected by COVID-19 at a high or completely negative level.

COVID-19 has caused revenue to decrease. At least 65% of private enterprises and 62% of FIEs said their revenue in 2020 was lower than 2019.

Sharper decreases in turnover have been found at private micro, small and medium enterprises. Meanwhile, for FIEs, sharper decreases have been reported for large-scale enterprises. The average decreases are 36% for private enterprises and 34% for FIEs.

Difficulties in accessing support packages

The survey found that the policies on extending the payment deadline of corporate income tax, VAT and luxury tax, and the remission of some kinds of fees and charges were more easily accessible.

Meanwhile, the program on lending enterprises to pay workers was the most difficult to access. Enterprises also complained that they cannot access preferential bank loans.

According to Truong Van Cam, deputy chair of Vitas, support packages remain inaccessible because of strict and impractical requirements. Enterprises have to prepare a lot of documents to prove they meet conditions to get support.

Most enterprises said they have measures to cut costs to minimize negative impact on them. At least 92% of private enterprises and 96% of FIEs have implemented one or more measures, including creating flexible working models, replacing supply chains and accelerating digital transformation.

Shawn W.Tan from World Bank noted that surveyed enterprises’ shifted to use digital technology and operate on digital platforms in 2020. 12% of surveyed enterprises said they have invested to digitize, but most of them are medium and large size.

Enterprises have applied digital platforms, including online contacts and online sales, but have not yet done so in the stages of the production and business activities that are more complicated.

VCCI has proposed that the government continue to exempt, reduce and extend the tax payment deadline, and slash interest rates to help cut production and business costs.

The government should also increase public investments, implement infrastructure works, and launch demand stimulus packages in the economic recovery period.

In the long term, it is necessary to pay attention to developing the domestic market, and strengthen the connection between domestic enterprises and consumers. More importantly, it is necessary to improve the legal system and settle bottlenecks in administrative procedures so as to create a favorable business environment that can support enterprises’ sustainable recovery.